Preliminary Results

RNS Number : 1613V

Sabien Technology Group PLC

29 October 2010

 



29 October 2010

Sabien Technology Group Plc

("Sabien')

Preliminary results for the 12 months ended 30 June 2010

Sabien (AIM: SNT) announces its preliminary results for the year ended 30 June 2010.

Sabien is focused on the manufacture and sale of M2G and M3G energy saving devices which are proven to reduce energy consumption on commercial boilers and air conditioning units by up to 35%.

Sabien Technology Group highlights 2010

·      Sales for the year up 44% to £973k from £675k

·      Loss after tax before exceptional items down 37% to £517k from £825k

·      Raised £400k bridging loan to repay General Capital's convertible loan of £483k

·      Successful placement of shares raising £1.475m and repayment of bridging loan

·      Sales from indirect partners increased by 34% to £154k from £115k representing 16% of total sales revenue

·      Appointment in May 2010 of Altium as NOMAD and Broker

Highlights since the year end

·      Sales orders received since 1 July 2010 total £813k representing 84% of the whole of the previous year's sales revenue

·      This year's Project 10 is fully subscribed with large multi-site blue chip organisations

·      Growing sales pipeline currently standing at c.£3.5m which includes over 100 blue chip private and public sector multi-site organisations

·      Appointment of Dr Martin Blake to the Board

For further information:

Sabien Technology Group plc Alan O'Brien - Chief Executive Officer Gus Orchard - Finance Director	020 7993 3700
Altium (NOMAD) Adrian Reed	0845 505 4343

Chairman & Chief Executive Officer's Report

We are pleased to report on the results for Sabien Technology Group Plc ("Sabien", "the Company" or "the Group") for the year ended 30 June 2010.

Introduction

For the period under review and subsequent to it, Sabien has continued to make steady progress in delivering new sales, developing its sales pipeline and establishing a reputation as a proven and trusted green technology provider in the UK.

History and market development

Sabien was set up in 2004 to commercialise M2G, an energy saving technology which reduces gas and oil consumption in commercial boilers. In May 2006, Sabien acquired the Intellectual Property and all commercial rights to M2G and floated on AIM in December 2006. In March 2009, Sabien obtained Underwriters Laboratories (UL) certification which enabled M2G to be sold in the USA.

The CRC Energy Efficiency Scheme (previously known as the Carbon Reduction Commitment) is now up and running and the Group is well placed to take advantage of the increasing interest in energy efficiency. The CRC Energy Efficiency Scheme came into force in April 2010 and was initially conceived as a mandatory cap and trade scheme requiring companies to purchase allowances from the government for their CO_²  emissions. All companies with half-hourly meters (HHMs) whose electricity consumption during 2008 exceeded 6,000 MWh (a cost of around £500,000) have to participate. 

The scheme had intended to recycle the revenue raised from the sale of allowances to those organisations participating in the scheme. The level of recycled payments would be determined by the organisation's performance in an energy efficiency league table, with the best performers receiving all the money they spent on allowances plus a bonus and the worst performers receiving only some of the money back. However, in the recent Comprehensive Spending Review, the government has now effectively turned the sale of allowances into a carbon tax, forcing all participants to purchase carbon allowances based on how much energy they use. We believe that this will have significant benefits for Sabien as organisations try to reduce their energy usage.

Financial results

Turnover in the year was £973k compared with £675k for the same period last year. The loss after taxation was £517k (before exceptional gains) compared with £825k in the same period in 2009. After exceptional gains, the loss after tax was reduced to £344k. The exceptional gains arose from the early settlement of the loan to General Capital Venture Finance and a reduction in the provision for loan notes payable.

In August 2009, the Company successfully refinanced its short term debt to General Capital Venture Finance Ltd with a two year term loan from funds advised by Thames Valley Capital Ltd (TVC). As part of this transaction, the Company granted warrants to TVC at a 20% premium to the share price at that time amounting to 10% of the enlarged share capital of the Company. This is explained in greater detail in the Notes to the Financial Statements.

Additionally in October 2009, in order to strengthen the balance sheet and provide additional working capital, the Group carried out a placing of shares which raised £1.475 million (gross). £400,000 of this placing was used to repay TVC's loan and this in turn reduced the number of warrants granted by almost 50% as well as leaving the Group with significant cash balances in hand.

At 30 June 2010, cash and cash deposits amounted to £965k (2009: £525k).

Financial Reporting Review Panel

The Financial Reporting Review Panel (FRRP) carries out a number of reviews of the audited accounts of companies each year. As part of this role, the  FRRP undertook a review of the Group's report and accounts for the year ended 30 June 2009 and identified a presentation error in the cash flow statement that related to the reclassification of convertible loan notes. In correcting this error, there is no effect on the opening and closing cash position, comprehensive income or balance sheet as previously reported as the error was one of presentation only.

This error has been corrected in the presentation of the 2009 comparative numbers in the cash flow statement in the current financial statements. The principal corrections relate to the presentation of cash generated from operations and cash flows from financing activities. As a consequence of these corrections, cash outflow from operating activities originally reported as £257k was understated by £483k and should therefore have been reported as £740k and net cash outflow from financing activities originally reported as £514k was overstated by £483k and should therefore have been reported as £31k in the 2009 accounts.

The Panel has indicated in an announcement made today that it welcomes the corrective action taken by the directors and regards its enquiries into the company's accounts for the year under review as fully concluded.

Overview

Results for the year were satisfactory although, frustratingly, delays by customers in placing orders meant that the Group did not achieve its target sales for the year to 30 June 2010. Since that date, the Group has seen a high level of contract wins totalling £813k. The phasing of contracts over financial period ends is an ever present issue as the Group develops critical mass but this does not distract from the fundamental momentum which we believe that M2G has in the current market.

The coalition government has ambitions to be the 'greenest government' ever and has a target of reducing energy consumption by 10% across central government properties which was actioned within weeks of the new government coming into power.

The opportunities for Sabien continue to be very positive with the implementation of the CRC Energy Efficiency Scheme (formerly the Carbon Reduction Commitment) in the UK, which became effective on 1 April 2010 and which, following the government's Comprehensive Spending Review, has now become a direct tax on energy usage in the country's largest companies. Most importantly, the scheme is no longer revenue neutral to the Exchequer.  Money paid for allowances will not now be recycled to participants and the league table on which repayments were to be based now has a purely reputational impact. A recent commentary by KPMG states that the scrapping of the revenue recycling could easily represent a five to ten fold increase in costs for most participants. The announced changes are likely to make all energy efficiency payback periods shorter which in turn makes Sabien's M2G an even more attractive proposition.

Reducing energy costs and commitments to reduce carbon emissions are driving the interest and demand for our products from public and private sector organisations. Sabien's M2G product is specifically aimed at providing a proven effective solution to the CRC problem for organisations which are affected by the CRC legislation. M2G reduces the cost of running gas and oil fired boilers and the associated carbon emissions by up to 35%.

During the year, around 40% of Sabien's revenue came from the public sector and this is expected to grow in the future despite the pressures being put on public sector finances. The public sector financing review is focused on driving efficiencies and reducing operating costs to include energy consumption and CO_² emissions. Sabien's M2G offers a quick and cost effective solution to their energy efficiency problems and public sector organisations have benefited from Salix funding which offers them a route to finance the capital cost of their energy efficiency programmes. Our public sector M2G sales pipeline consists of a number of entities which have already received Salix funding approval.  

We continue to see increasing interest from facilities management, energy/carbon consultancies and utility companies for Sabien's M2G product as these companies seek ways to reduce their clients' energy consumption and carbon emissions.

In the Group's interim report, we said that there had been strong customer demand with a significant year on year increase in sales quotations and a steadily increasing order book. As already announced, a number of significant orders have been received since the year end. Many of these orders are for initial phases of roll-out which are being installed and we expect to receive further significant orders from these customers for further phases of roll-out both in the current financial year and beyond.

Project 10

We have continued to run our Project 10 (P10) paid pilot scheme and are fully subscribed for the current heating season with many well-known blue-chip private and large public UK multi-site organisations. Clients include major food retailers, retail banks, leisure groups, hospital operators and local councils.

This is now the 3^rd year that we have run the P10 scheme whereby we agree to install M2Gs at up to 3 sites in each of 10 large prospective customers and to monitor the results obtained from the M2Gs for periods from 1 to 3 months. At the conclusion of the pilot period, a report is produced for each customer in which the results of the pilot are presented along with an estimate of the likely levels of savings in energy and CO_² emissions were M2G to be deployed over the customer's estate.  

Most of the larger orders received since our listing in December 2006 were the result of Project 10 pilots. We continue to engage with previous participants with the view to obtaining orders in the current financial year. Reducing gas consumption and CO_² remains a high priority for these organisations and we will update the market on future M2G orders accordingly.  

Operational progress

We continue to develop and strengthen our technical expertise in the energy efficiency market and to help our clients reduce energy costs and carbon emissions. We have been commended by all our clients on our project planning, installation quality and for delivering their M2G rollout within budget. During the period we appointed a further installation partner, SEC Contracting, a division of Scottish & Southern Electric Energy Group.

We are continuing to develop our indirect partner channels and are beginning to see results from them. In the past year, indirect partnership agreements have been signed with Serco, British Gas, Balfour Beatty and Jones Lang LaSalle along with a number of smaller facilities management companies and energy consultancies. These alliances generated 16% of total revenue in the last financial year and we would expect this number to rise this year and in future years.  

We continue to participate in trade shows and exhibitions and have generated a large volume of sales prospects from these. Sabien's name is increasingly being recognised in the sector of energy efficiency and the number of prospects that contact us directly as a result of client referrals and our marketing efforts has increased materially. Over the past year, the company has figured on the pages of the Daily Telegraph, Financial Times, The Mail on Sunday, Investors Chronicle and Shares Magazine and continues to feature in all the key industry trade titles.

We are looking at increasing our presence in the US market where we believe there is   potential and we will be looking to appoint further distributors as and when suitable companies become identified. This will be done in a careful and cost effective manner but could open a very large market for our M2G product.

Strategy and new products

Sabien's strategy is to become a supplier of choice for private and public sector organisations that are faced with delivering on their energy and carbon reduction strategies. The Company is continuing with this objective of delivering its commercially viable energy-efficiency technology both in the UK and overseas to a wider base of blue-chip clients.

We are in the early stages of looking at modifying our M2G product to address other energy efficiency challenges facing our clients. We do not believe at this stage that there will be any significant costs involved in bringing a new application to the testing and piloting stages as we will be leveraging our existing Intellectual Property in the M2G.

We have also begun the process of looking at other green technologies from overseas markets that we can sell into our existing customer base to complement our current product offerings. 

Board, management and people

We would like to thank our fellow directors and all the Company employees whose efforts have contributed to the progress of the Company over the last twelve months. Their efforts have been crucial to our achievements.

Outlook

The Group has made a good start to the new financial year and since 1 July 2010 has received purchase orders totalling £813k, representing the equivalent of 84% of last year's turnover, all of which will be recognised as revenue in the current financial year.

The size of the business pipeline at c.£3.5m is at a record level. We have a high quality   blue-chip private and large public customer base. These facts plus the level of orders received, which represent to a large extent initial phases of roll-out and which should generate significant future revenues, along with a well-controlled cost base, all enable the Directors to feel confident about the future.

Dr Clive Morton OBE                                                                Alan O'Brien

Chairman                                                                                  Chief Executive Officer

28 October 2010

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2010

		2010	2009
	Notes	£'000	£'000
Revenue		973	675
Cost of sales		(160)	(102)
Gross profit		813	573
Administrative expenses		(1,322)	(1,379)
Operating Loss		(509)	(806)
Investment revenues	5	5	26
Other gains and losses	6	173	-
Finance costs	7	(13)	(45)
Loss before tax	4	(344)	(825)
Corporation tax		-	-
Loss for the year attributable to equity holders of the parent company		(344)	(825)
Other comprehensive income
Transfer from Shares to be issued		(18)	-
Transfer to Retained earnings		18	-
Other comprehensive income for the year		-	-
Total comprehensive income for the year		(344)	(825)
Loss per share in pence - basic and diluted	9	(1.2)	(3.1)

Consolidated and Company Balance Sheet

As at 30 June 2010

		Group		Company
		2010	2009	2010	2009
	Notes	£'000	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		16	34	-	-
Intangible assets		744	864	-	-
Investment in subsidiaries		-	-	216	544
Total non-current assets		760	898	216	544
Current assets
Inventories		128	137	-	-
Trade and other receivables		295	162	547	133
Cash and cash equivalents		965	525	903	510
Total current assets		1,388	824	1,450	643
Total assets		2,148	1,722	1,666	1,187
LIABILITIES
Current liabilities
Trade and other payables		220	609	84	515
Total current liabilities		220	609	84	515
Non-current liabilities
Long-term provisions		-	222	-	222
Total non-current liabilities		-	222	-	222
Total liabilities		220	831	84	737
Net Assets		1,928	891	1,582	450
EQUITY
Equity attributable to equity holders of the parent
Share capital	10	1,574	1,329	1,574	1,329
Other reserves		2,767	1,649	3,538	2,420
Retained (losses)/earnings		(2,413)	(2,087)	(3,530)	(3,299)
Total equity		1,928	891	1,582	450

Consolidated and Company Cash Flow Statement

For the year ended 30 June 2010

	Group		Company
	2010	2009	2010	2009
		As restated (Note 3)		As restated (Note 3)
	£'000	£'000	£'000	£'000
Cash flows from operating activities
Loss before taxation	(344)	(825)	(249)	(1,120)
Adjustments for:
Depreciation and amortisation	64	40	-	-
Exceptional gains	(247)	-	(247)	-
Impairment provision	74	288	328	1,280
Reduction in long term provisions	-	(287)	-	(287)
Finance income	(5)	(26)	(20)	(57)
Finance expense	13	45	13	45
Transfers (from)/to equity reserves	18	27	18	28
Decrease/(Increase) in trade and other receivables	(133)	47	(414)	123
Decrease/(Increase) in inventories	9	(16)	-	-
Increase/(Decrease) in trade and other payables (as previously reported)	33	450	(9)	491
Prior year adjustment (note 3)	-	(483)	-	(483)
Increase/(Decrease) in trade and other payables (as restated)	33	(33)	(9)	8
Cash generated from operations (as previously reported)	(518)	(257)	(580)	503
Prior year adjustment (note 3)	-	(483)	-	(483)
Cash generated from operations (as restated)	(518)	(740)	(580)	20
Corporation taxes recovered/(paid)	-	-	-	-
Net cash (outflow)/inflow from operating activities	(518)	(740)	(580)	20
Cash flows from investing activities
Investment in subsidiary company	-	-	-	(800)
Purchase of property, plant and equipment	-	(4)	-	-
Finance income	5	26	20	57
Net cash generated by/(used in) investing activities	5	22	20	(743)
Cash flows from financing activities
Proceeds from share placement	1,399	-	1,399	-
(Repayment of)/proceeds from long term borrowings (as previously reported)	(440)	(514)	(440)	(514)
Prior year adjustment (note 3)	-	483	-	483
(Repayment of)/proceeds from long term borrowings (as restated)	(440)	(31)	(440)	(31)
Finance expense	(6)	-	(6)	-
Net cash from financing activities (as previously reported)	953	(514)	953	(514)
Prior year adjustment (note 3)	-	483	-	483
Net cash from financing activities as restated	953	(31)	953	(31)
Net increase/(decrease) in cash and cash equivalents	440	(749)	393	(754)
Cash and cash equivalents at the beginning of the year	525	1,274	510	1,264
Cash and cash equivalents at the end of the year	965	525	903	510

Notes to the Financial Statements

For the year ended 30 June 2010

1.         Basis of Preparation

The results for the year are preliminary and unaudited.

While the financial information included in this interim announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS.  The full financial statements of the company will be prepared in accordance with IFRS, International Accounting Standards and their interpretations issued or adopted by the International Accounting Standards Board as adopted for use in the European Union. 

During the year, the Company raised £1.475m (£1.4m net) via a placing to the market. The directors therefore feel that the Group is a going concern and have accordingly prepared these financial statements on a going concern basis.

The consolidated financial statements have been prepared on the historical cost basis and are presented in £'000 unless otherwise stated.

2.         Basis of consolidation:

The consolidated balance sheet and statement of comprehensive income includes the financial statements of the Company and its subsidiaries at 30 June 2010. The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 30 June each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Business combinations involving entities under common control fall outside the scope of IFRS and are consolidated using merger accounting under which the group incorporates the assets and liabilities of the entities at the amounts recorded in the books of the entities.  No goodwill arises on consolidation and any difference arising from the use of merger accounting is included in equity as a merger reserve.

The consolidated financial information incorporates the combined companies' results as if the companies had always been combined. 

In respect of other business combinations fair values are attributed to the net assets acquired. Goodwill, which represents the difference between the purchase consideration and the fair value of the net assets acquired, is capitalised and subject to an impairment review at least annually or more frequently if events or changes in circumstances indicate that the goodwill may be impaired.

3.         Cash Flow - Prior Year Adjustment

The Cash Flow statements for the year ended 30 June 2009 contained errors in the Cash flows from operating activities and the Cash flows from financing activities relating to the presentation of the General Capital Venture Finance loan of £483k which had changed from a long to a short term liability during the year.

	Group	Company
	£'000	£'000
Cash flows from operating activities
Increase/(decrease) in trade and other payables (as previously reported)	450	491
Prior year adjustment	(483)	(483)
Increase/(decrease) in trade and other payables (as restated)	(33)	8
Cash flows from financing activities
(Repayment of)/proceeds from long term borrowings (as previously reported)	(514)	(514)
Prior year adjustment	483	483
(Repayment of)/proceeds from long term borrowings (as restated)	(31)	(31)
Net (decrease) in cash and cash equivalents
Net effect of prior year adjustment	-	-

The presentation in last year's financial statements was incorrect as the loan had not been repaid but only reclassified from long to short term. However, the net effect of the prior year adjustment on the Net decrease in cash and cash equivalents was £ nil and there was no effect on the cash and cash equivalents at the beginning and at the end of the year nor on the Statement of comprehensive income, Balance sheets and Statement of changes in equity.

4.         Loss before tax

The loss before tax is stated after charging/(crediting):

	Year ended 30 June 2010	Year ended 30 June 2009
	£'000	£'000
Depreciation of owned tangible fixed assets	18	17
Amortisation of intangible assets	46	23
Operating lease rentals - land and buildings	18	31

5.         Investment revenues

	Year ended 30 June 2010	Year ended 30 June 2009
	£'000	£'000
Interest receivable	5	26

6.         Other gains and losses

	Year ended 30 June 2010	Year ended 30 June 2009
	£'000	£'000
Gain on settlement of convertible loan	159	-
Less cost of warrants	(38)	-
Gain on reversal of loan note provision	126	-
Intellectual property impairment provision	(74)	-
Total net other gains	173	-

7.         Finance costs

	Year ended 30 June 2010	Year ended 30 June 2009
	£'000	£'000
Interest payable	13	45

8.         Corporation tax

	Year ended 30 June 2010	Year ended 30 June 2009
	£'000	£'000
Current tax	-	-
Deferred tax	-	-
Total tax recovery for the year	-	-
The tax recovery for the year can be reconciled to the loss per the income statement as follows:
Loss before tax	(344)	(825)
Tax on loss on ordinary activities at standard UK corporation tax rate of 21% (2009: 21%)	(72)	(173)
Expenses not deductible for tax purposes	2	3
Capital allowances in excess of depreciation	3	1
Other short term timing differences	57	152
Unrelieved tax losses	10	17
Current tax recovery	-	-

No provision has been made to recognise a deferred tax asset as future profitability is uncertain. The aggregate amount of deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognised in the balance sheet is estimated at £2,273k (2009: £1,942k) which at the standard tax rate would equate to £477k (2009: £408k).

9.         Loss per share

The calculation of loss per share is based on the loss for the year attributable to equity holders of £344k (2009: £825k) and a weighted average number of shares in issue during the period of 29,847,844 (2009: 26,570,511).  At the year end, warrants for 1,518,336 shares and options over 1,953,527 shares were in issue.  These options have not been taken into account in calculating loss per share as they are anti-dilutive.

10.       Share capital

	2010	2009
	£'000	£'000
Authorised
50,000,000 Ordinary shares of 5p each (2010 and 2009)	2,500	2,500
Allotted, called up and fully paid
31,486,511 Ordinary shares of 5p each (2009 - 26,570,511)	1,574	1,329

On 14 October 2009, the company placed 4,916,000 shares at a price of 30p each raising £1.475m (£1.4m after expenses).

Share warrants

On 7 August 2009, the company granted 2,952,279 warrants to TVI 2 Limited, exercisable at 6.6p each over a period of five years. Subsequent to the repayment of the loan to TVI 2 Limited in October 2009, the number of warrants granted has reduced to 1,518,356 and are now exercisable at a price of 6.42p each. These warrants represent 4.6% of the enlarged share capital including Ordinary shares potentially to be issued under the Warrant instrument. The Group has recognised an exceptional charge of £38k arising from these warrants in the statement of comprehensive income for the year ended 30 June 2010 and this has been credited to the Shares to be Issued Reserve in the balance sheet.

The financial information above for the years ended 30 June 2010 and 2009, in respect of which the accounting policies are consistent, does not constitute the statutory financial statements for those years.  It is anticipated that the annual report and accounts for the year ended 30 June 2010 together with a notice of Annual General Meeting to be held at The Reform Club, 104 Pall Mall, London SW1Y 5EW  at 11.00 a.m. on 24 November 2010 will be posted to shareholders on or around 1 November 2010.  Copies will be available from the Company Secretary, Sabien Technology Group Plc, 34 Clarendon Road, Watford, Herts WD17 1JJ and on the Company's website, www.sabien-tech.co.uk. 

 

END

 

 

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